Black Country Reinvestment Society offers model for Government
The Government should look to a small lender in the Black Country as a model for ensuring credit reaches small businesses, according to its boss.
The chief executive of the Black Country Reinvestment Society (BCRS), which lends to businesses making a positive contribution to the social, environmental or economic well being of the Black Country, Staffordshire, said his society’s model offered a solution to get the economy moving again.
BCRS recently celebrated its small business loan fund reaching £5 million, and it also has plans to extend this figure to £10 million within the next two years.
The company was founded in 2002 as a not-for-profit loan fund offering sums of between £10,000 and £50,000 to small businesses in the Black Country who might struggle to find funding from traditional sources.
Black Country Reinvestment Society chief executive Paul Kalinauckas said: “BCRS are in an area where the multi-trillion pound commercial banking sector refuses to operate.”
“If they could, they’d be doing it.
“But they aren’t, because they can’t make money out of it and the transaction costs are too high.
“The transaction costs for a £20,000 loan are similar to a £2 million loan.
“But there’s money to be made from the £2 million loan, none from the £20,000 loan, so it’s not worth the effort.
“That’s the challenge we face.
“The banks say that demands for loans from the SME sector have been slack.
“That’s not surprising. If BCRS offered asset-backed, copper plated guaranteed loans in the way that banks do, we would then require our clients to put up all of their assets - thus putting the futures of their families at risk – and we’d have our pound of flesh.
“But that is completely contrary to the BCRS ethos as a co-operative. We want to back enterprising people, not ruin them.
“Vince Cable has stated that he is worried about the behaviour of the banks. They have already been given trillions of tax-payers money.
“How much more do they need?
“If the coalition government is serious about helping and encouraging small enterprises and innovators, they can do worse than looking at the model we have created here in the Black Country – a workable solution based on mutual principles that can help make the Black Country great again.
“And the time is now if we are to encourage economic recovery.”
